Blockchain has the capability to revolutionise the business world. It was originally developed to underpin the cryptocurrency Bitcoin, the most well-known application of blockchain technology in practice which already functions as a global currency. Blockchain is basically a way to structure data.
It does this in blocks of transactions that are all linked together (hence the name). This breakthrough allows people to share a digital ledger across a network of computers without the need for a central trusted manager. Thus no single person has the ability to alter the digital chain thanks to the maths that underpins the system. Any attempt will be clearly signalled.
On 25th May 2017 the value of a single bitcoin hit a record high of $2,600 (up by 30% the previous week and up by just under 200% in value this year alone). Other related digital currencies are also roaring ahead in value going up by over 50% in the previous seven days (to total more than $90bn) . If you had bought $1,000 worth of bitcoins in 2010 they would now sell for $36.7m. The financial markets are waking up to the huge potential that this technology has as a new medium of exchange.
Interest in blockchain, and its rapid take-up, illustrates the huge potential of its’ underlying technology. Blockchain combines cryptography with peer-to-peer networks to create a trusted shared database of transactions that is controlled by no one. Can bitcoin become a popular currency, and decrease the popularity of euros, dollars, pounds, roubles and others? These are questions which cannot be predicted precisely. However, if blockchain technologies become popular in various industries, as a result we could have a more integrated global economy which can enhance economic growth and decrease poverty. A true financial, business and social revolution.
People rarely lend to each other, hence the need for banks as trusted third parties – the go between who matches lenders (creditors) with borrowers (debtors). The beauty of cryptocurrencies is that it removes the need for the trusted third party, the trusted encrypted database performs this task. This has huge implications for any business that requires the verification of payments and performance of contracts – that is, most businesses.
What are blockchain’s main advantages? Enhances decentralisation.
- Reduces the amount of intermediaries.
- Value can be stored.
- Value, especially money, can be moved forward in a rapid speed around the world.
- Reduces costs, this could enhance economic growth.
- Blockchain can act as a business for creative minds.
- Easier to fight crime and fraud – everything can be tracked.
- This will make the business world more solid and stable.
- Enhances individual rights and privacy in the online world.
- Reduces systemic risk in the financial system.
- Introduces fully automated businesses backed by artificial intelligence (AI).
- Fights against counterfeiting.
- Makes value chains transparent.
The true beauty of blockchain is that something can be digital and unique without a real world representation. For example, things such as contracts, wills, deeds, share certificates and so forth. Instead of a trusted intermediary to verify the transactions, huge numbers of computers working independently perform the verification at no cost to those involved in the transaction. The reward they are hoping to get for undertaking this ‘mining’ process are bitcoins. So basically it is the verification process that holds the seeds of revolution across huge numbers of industries.
One of the most dramatic disruptions is happening in the financial industry. One of the Bank of England’s research focus areas is based around financial technology (fintech) and how it impacts how markets and society functions. Some banks are prepared to stay in the industry but others have decided to reach for new industries, which are more stable, like financing the building of hospitals, providing health care services and infrastructure. Hence, the banking industry is currently a point of reference for what the future might hold, which means that some banks will stay alive and others will disappear, and new ones will emerge as bitcoin/blockchain banks. Society could benefit profoundly as some small (micro) payments now become viable electronically. A country like India where huge numbers still do not have bank access could see profound changes as banking is brought within reach for these people. They could then save, borrow and plan better for their future.
Marketing is also watching developments closely. The marketing industry is embracing the current environment by utilising big data with greater accuracy. Facebook now has over 2 billion regular users, Google and Amazon are collecting monumental amounts of individualised data about us. These platforms are nearing the possibility of gaining complete data sets rather than relying on samples. Blockchain offers the possibility to enhance our online rights and privacy – individuals would keep this data as a unique digital blockchain. This would be a problem for marketers because individuals can then keep their online records private. This could mean that the marketing industry might go back to the early 1990’s, which meant that companies had overall statistics of groups but lacked data on each individual. Blockchain will just balance the current situation, where buyers feel that they cannot control their online data. In the future they can decide if they want to retain this privacy or sell it onto companies.
Blockchain has also the capability to enhance entrepreneurship in developed and developing countries. It can break barriers concerning bureaucracy and corruption by bypassing existing power structures, which are not promoting entrepreneurship. As a result corrupted and bureaucratic countries might receive wanted economic boosts and more diverse economic structures, which can decrease poverty and increase wealth. Hence, blockchain can also enhance female entrepreneurship in countries where women have a low amount of human rights and freedoms. One of the most important functions is to make value chains more transparent. Hence, a modern type of slavery might come to an end.
Jukka Aminoff is a Visiting Honorary Professor at Anglia Ruskin University, Dr Robin Gowers PhD is a Senior Lecturer in Leadership and Management at Anglia Ruskin University.